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AIA Engineering: Best ever quarter

Aug 16, 2012

AIA Engineering has announced the first quarter results of financial year 2012-2013(1QFY13). While the topline grew by around 62.7% YoY bottomline grew 37.5% YoY during the quarter. Here is our analysis of the results.

Performance summary

Top-line increases by 62.7% YoY in 1QFY13. Top line growth was boosted by strong volumes, rupee depreciation and improvement in realizations.

Operating profits increase by 46.3% YoY during the quarter due to healthy growth in topline.

Net profits grew 37.5% YoY due to strong performance at the operating level.

The current debt and cash stands at Rs 530 m and Rs 3.2 bn respectively.

Consolidated financial snapshot

(Rs m)

1QFY12

1QFY13

Change

Income from operations

2,690

4,375

62.7%

Expenditure

2,142

3,574

66.8%

Operating profit (EBDITA)

548

802

46.3%

Operating profit margin (%)

20.4%

18.3%

Other income

69

65

-5.0%

Finance cost

6

16

154.6%

Depreciation

69

84

21.9%

Profit before tax

541.30

766.82

41.7%

Tax

150

226

51.1%

Profit after tax/(loss)

391

540.37

38.0%

Minority Interest

0

1.98

39560.0%

Profit after tax and minoity interest

391.48

538.39

37.5%

Net profit margin (%)

14.6%

12.3%

No. of shares (m)

94.3

Basic & diluted earnings per share (Rs)

5.71

P/E ratio (x) *

15.9

* On trailing 12 month basis

What has driven performance in 1QFY13?

Net sales increased 62.7% YoY during the quarter. Rupee depreciation, strong volumes and improvement in blended realizations boosted top line growth. The company sold 40,000 tonnes in 1QFY13. Out of that, 18,000 tonnes came from the mining sector while cement sector contributed 16,000-17,000 tonnes. The realization for the quarter stood at Rs 106 per kg, which was marginally better than previous quarter.

Operating profits increased 46.3% YoY due to strong sales performance during the quarter. However, operating margins declined to 18.3% during the quarter from 20.4% in 1QFY12. A forex loss of Rs 150 m impacted the operating margins during the quarter.

What to expect?

This was the best ever quarter for AIA Engineering in terms of reported sales figures. And management expects the momentum to continue going forward. Based on the current quarter performance, management expects the full year volumes to be in the region of 160,000 tonnes. Mining is anticipated to be the key contributor here with volumes expectation in the region of 75,000-80,000 tonnes. This should approximately translate into revenues of Rs 16-17 bn for the full year.

The company also plans to add 100,000 tonnes of capacity over the next 2 years. For this, it has earmarked capex of Rs 2.25-2.5 bn. In FY13, it plans to incur Rs 700-800 m towards the same while the balance is expected to be incurred in FY14. As far as margins are concerned, it may be noted that they were impacted by the forex loss of Rs 150 m during the current quarter. For the full year management expects operating margins to be in the region of 20-22%. Based on these factors and current valuations we maintain our hold view on the stock.

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